Thursday, 28 March 2013

The New Scientist cover caught my eye: Stupidity: Why are humans so varied in their mental abilities? Finally, I
thought, a popular treatment of an important question. It is not entirely fair
to regard a popular science magazine as being likely to discuss the topic of
intelligence in any depth. It is
aimed at a general audience, and the best it can do is to act as an indicator
of what the magazine thinks will play to their reader’s world view and capture
their attention. The word Stupidity certainly did that, with all its negative,
disparaging connotations.

So, as only an indicator of popular views about
intelligence, here are a few quotations:

It
turns out that our usual measures of intelligence – particularly IQ – have very
little to do with the kind of irrational, illogical behaviours that so enraged
Flaubert. You really can be highly intelligent, and at the same time very
stupid.

Modern
attempts to study variations in human ability tended to focus on IQ tests that
put a single number on someone’s mental capacity. They are perhaps best
recognised as a measure of abstract reasoning, says psychologist Richard
Nesbitt….

Possibly
a third of the variation in our intelligence is down to the environment. …..
Genes meanwhile contribute more than 40% of the differences between two people.

Intelligence does not guarantee good decision-making
in all circumstances, simply better decision-making in more circumstances than
a duller person. Some problems forms are
inherently difficult and ambiguous. For example, it is easier to understand
natural frequencies than percentages with decimal point. Apart from
intelligence, social pressures and emotional attachments influence decisions.

Modern IQ tests give one overall figure, and also
figures for 3 to 4 component indices, usually verbal comprehension, perceptual
organisation, working memory, plus processing speed. The single figure is
usually the best predictor, but the others have their place in specific
circumstances. The fact that one single number is the best predictor of human
achievements is testimony to its power.

40% is the heritability estimate for children, but
it rises to 60% plus for adults. 70/30
is not a bad estimate for wealthy countries, 50/50 for very poor ones.

Sioux Indians, for all their other skills, did not
leave a written record of how they estimated intelligence. The point is
misleading, and a poor match with cross-cultural test results. People from
profoundly different cultures make the same sorts of errors on culture reduced
tests, and the pattern suggests a largely universal problem-solving capacity. The
predictive power of intelligence is similar in culturally different countries.

And just one more thing, if you want to find out
about intelligence in a UK publication, why not talk to Ian Deary, who is doing
much of the research, and has written an excellent short introduction to the
topic. If you want an American, why not Earl Hunt, who has given a balanced
view in a larger and more up to date volume? If you are interested primarily in
the importance of intelligence for everyday life, why not talk to Linda
Gottfredson?

Anyway, the rest of the article is about Keith
Stanovich, who is “working on a rationality quotient”. This has yet to be
released, and yet to be evaluated against intelligence tests. We do not know
what it will add in the way of predictive accuracy to that already achieved by
intelligence tests. Similarly, we lack proper large-scale comparative studies
with: multiple intelligences, emotional intelligences, and practical intelligences.
If the goal is wide open, why can’t one of these pioneers get the ball in the
net? All they must do is develop a test, administer it to a representative
sample (at least as good as a psychometric standardisation sample) alongside a
validated intelligence test, and then compare the results when predicting some
real life variables. After that, they can market the damn thing. Why the
perpetual delay?

Interestingly, the one thing which shows up in this
article is the difficulty people have in understanding that a strong
correlation is not a perfect correlation.
It is possible for an IQ test to
be the best predictor, and yet for it to be far short of a perfect predictor.
The other difficulty which people have is distinguishing between variance that
has been accounted for, and variance which cannot yet be accounted for. The
unexplained variance is not owned by the next person with a fanciful
hypothesis: it is merely up for grabs for anyone who can prove an additional power of prediction. As
anyone who has fooled around with multiple regressions will know, (after looking
at 50 or more regressions) getting a high R square in behavioural science
research is very difficult. Once you have a couple of good predictors it is
hard to shift the R-square up further, even when you add many putative
predictors. Often, a couple of independent variables hoover up all the
predictive variance.

In his Tractatus, Wittgenstein
intoned: "Whereof one cannot speak, thereof one must be silent." With
more verve and vernacular charm his friend Frank Ramsey quipped:
"What we can't say we can't say, and we can't whistle it either."

Monday, 25 March 2013

Empiricists
study the world as it is. Reformers try to create the world
as it should be. These Accountants and Missionaries do not always see eye to
eye.

The
history of the treatment of the mentally ill makes painful reading,
at least to modern sensibilities. The mentally ill have been abused, ridiculed,
stripped of dignity and legal rights, and shunned by the public, who feared
their madness. The mad were seen as dangerous and a nuisance. In their madness
they might strike out at you, subject you to abuse, to unpleasant sights and
embarrassing outbursts, and at the very least would need help and compassion
while not being able to give much in return. For example, when we are depressed
we have less to offer our friends, and more need of their support,
encouragement and tolerance for our lack of contribution.

In the face of these historical abuses, in 1796 the
Quakers’ York Retreat offered humane
and moral treatment, on the Christian assumption that, whatever the sufferer’s behavioural
degradation; the inner light of humanity could never be extinguished. Since
that time we have become kinder, and more liberal and generous about disordered
comportment. We know that not all mental illness is terminal, irreversible and
dangerous. Nowadays we want to reduce stigma, that badge of shame and disgrace which some
in society attach to those with characteristics, behaviours or beliefs they
find disturbing. Hence a missionary movement among mental healthcare
professionals to normalise mental distress, to understand the perspective of
even the oddest point of view, and to break down the shame of admitting a mental
affliction.

I was always somewhat surprised when, even in the
privacy of my office, beset with problems and worries, my patient’s first words
after bursting into tears were always “I’m sorry”. I would mumble something
about not needing to apologise for having emotions, but in the purely social
sense, my tearful patients were right. They had sent out a very powerful
distress signal, generally without meaning to, had broken the taboo of
emotional restraint and now had to justify this dramatic call for assistance.
They felt they were being a drag, and didn’t want to be.

So, if every right thinking person in the psycho-business
should be de-stigmatising mental illness, how
do we deal with the fact that some of the mentally ill are dangerous? Ideally,
we would follow the empirical tradition, and give an accurate and balanced message:
“Most people with mental illness are no more dangerous than anyone else, but a
minority are more prone to violence. It is difficult to predict dangerousness. Here
are the facts and you can judge for yourself”.

What are the facts? In the behavioural sciences, facts are always a work in progress,
but the overall picture is now reasonably clear: schizophrenics are more violent
as a category, something of the order of 4 times more violent, perhaps even 5
times higher. Given that most people are not very violent at all, being four
times more violent is still not very dangerous, but it is an appreciable
increase. Drug takers are 10 times more violent. Perhaps shunning some people
is a prudent policy. It is certainly within the discretion of any citizen to
judge that a fourfold increase in even a very small risk is something worth
avoiding, particularly if it can be done without too much bother.

At this point we need to cover just a few technical
issues. The best technique to determine violence rates is a prospective study
in which you define a population sample and study them long term. Birth cohorts
are the gold standard. Follow this large sample, find out who gets
schizophrenia, and then take objective measures of violence (arrests, cautions,
convictions, jail sentences for example) and then you have your rates of
violence, both absolute and relative to those who do not have schizophrenia. Here are some findings, which I have drawn from a
paper I will discuss later on:

Hodgins (1992), in a 30-year follow-up of an unselected Swedish birth
cohort, found that compared with those with no mental disorder, males with
major mental disorder had a 4-fold and women a 27.5-fold increased risk of
violent offences. No separate data were provided for schizophrenia. A later
study using the same methodology revealed similar findings (Hodginset al, 1996).

The first cohort study to demonstrate the
quantitative risk of violent behaviour for specific psychotic categories
followed an unselected birth cohort of 12 058 individuals prospectively for 26
years (Tiihonenet al, 1997). The risk of violent offences among males with
schizophrenia was 7-fold higher than controls without mental disorder.

Arseneaultet al(2000) studied the past-year prevalence of violence in 961 young
adults who constituted 94% of a total city birth cohort. Three Axis I disorders
were uniquely associated with violence after controlling for demographic risk
factors and all other comorbid disorders: alcohol dependence, marijuana
dependence and schizophrenic spectrum disorder.

Probably the most important study in the violence
literature to date is that of Swansonet al(1990). Using a sample of 10 059 adult residents from
Epidemiologic Catchment Area (ECA) study sites (Eaton & Kessler, 1985), the authors examined the relationship
between violence and psychiatric disorder. Eight per cent of those with
schizophrenia alone were violent, compared with 2% of those without mental
illness. Comorbidity with substance abuse increased this percentage to 30%.

Two factors appear to discriminate those with
schizophrenia at increased risk of committing violent acts: comorbid substance
abuse and acute psychotic symptoms.

It is important to note that because there is
an increase in violence risk in those without comorbidity, substance abuse
merely increases the level of risk rather than causing it (Arsenaultet
al,
2000;Brennanet al, 2000). Hence, the risk from substance abuse appears to be
additive.

In Dunedin, New Zealand, 94% of a total city
birth cohort were followed up at age 21 years. Without considering comorbidity,
just over 10% of past-year violence committed by these young adults was
attributable to schizophrenic spectrum disorders

So, how has psychiatry responded to this awkward junction of facts and
missions? The Royal College of Psychiatrists currently gives the following
statement as a key fact about schizophrenia: Many people think that schizophrenia makes people
violent. This is the exception, not the rule. People with schizophrenia are
more likely to be victims of violence by others.

Comment: Well, this presentation
is not entirely balanced. Gang members are also likely to be victims of
violence by others. They are also violent themselves. Schizophrenia makes
people four times more violent. Their violence is an exception, but these
exceptions happen four times more frequently.

So, what other exhibits
should we look at?

One of the better
known papers in the field is Walsh, Buchanan, and Fahy
(2002) Violence and schizophrenia: examining the evidence,
from which I had drawn the above papers on violence rates.

They say: It is now accepted
that people with schizophrenia are significantly more likely to be violent than
other members of the general population. A less acknowledged fact is that the
proportion of societal violence attributable to schizophrenia is small.

Comment: So, they are more violent,
but make a small contribution to “societal” violence? How can that be so? Now
you see it, now you don’t? Or is there some real reason why their increased
violence does not have an impact on society?

Here is their argument, in the
expanded form of a subsequent book chapter:Criminal and
violent behaviour in schizophrenia by Walsh and Buchanan in (Eds) Murray,
Jones, Susser, van Os and Cannon (2003) The
Epidemiology of Schizophrenia, Cambridge University Press.

It
is now generally accepted that people with schizophrenia, albeit by virtue of
the activity of a small subgroup, are significantly
more likely to be violent than members of the general

population,
but the proportion of societal violence attributable to this group is small.

They continue thus:

To
prevent unnecessary stigmatization of the seriously mentally ill, with all the attendant
difficulties, it is the duty of researchers to present a
balanced picture. By neglecting to report measures of both relative and
absolute risk a skewed picture may emerge. An example of a balanced report found
that men with schizophrenia were up to five
times more likely to be convicted of serious violence than the general population
(Wallace et al., 1998). Results also presented indicated that 99.97% of those
with schizophrenia would not be convicted of serious violence in a given year and
that the probability that any given patient with schizophrenia will commit homicide
is tiny (approximate annual risk 1:3000 for men and 1:33000 for women).

Comment: Although intending to be balanced, this is
another misleading presentation. Fahy did better in earlier papers in which he
said that schizophrenics were about 4 times more violent than ordinary members
of the public, but that the absolute rates were very low. Let us study some of
the assertions:

“99.97%
of those with schizophrenia would not be convicted of serious violence in a
given year”.

Comment: Presumably this is intended to be
reassuring. What does 99.97% mean? It sounds like 100%. In his marvellous “Reckoning with Risk” (2003)
Gerd Gigerenzer showed that percentages with decimal points were almost
impossible for most people to understand. (I had to count the zeros, and got it
wrong the first time round). The best way to make the numbers transparent is to
convert them to natural frequencies, ordinary numbers without fractions or
decimal points. Using this approach we can say that 9997 schizophrenics in
10,000 won’t be convicted of violence, but 3 will. So 3 in10,000 schizophrenics
(10,000 minus 9997 = 3) will get convicted of serious violence. Using the usual
yardstick for rare events, that means that 30 per 100,000 schizophrenics are
convicted of serious violence each year.

What is the rate of convictions per thousand in the
general public? It has not been given for comparative purposes, so the
percentage figure is difficult to assess. However, it has been admitted that
schizophrenics are 5 times more violent. Thus we can calculate that the rate
for mentally well citizens would be roughly 6 per 100,000. One popular proposal
to make statistics easier to understand is to place the frequency statistics in
the context of villages, towns and cities. Therefore, if you spent a year in a
town of 100,000 schizophrenics you might not be at too much risk yourself, but
there would be about 30 violent crimes in that town. You might find this
somewhat alarming. A neighbouring town of ordinary citizens would have 6
violent crimes to contend with. People will be people, you may say, but from a
civilized point of view, every violent crime is unnecessary. It is likely that
the reputations of these towns would differ significantly. Which town would you
wish to live in, if you were free to choose?

(Paradoxically, the Press in the first town would
never bother to report that the accused was a schizophrenic. It would be
redundant, so in that town the media could not be accused of stigmatising
mental illness.)

The other issue, never covered in these discussions,
is that the overall risk rate is not a good predictor of the perceived personal
risk rate. Violence is most likely to come from someone you know, with whom you
are in a dispute, for whatever reason, usually because of tangled love affairs,
business deals and, most of all, criminal activities. Most people know this,
and know the sort of people they ought to avoid. The fear caused by
schizophrenia is that it is associated with totally motiveless crimes. There is
no way you can protect yourself by regulating your behaviour or your friendship
patterns. You might be sitting on a bus, minding your own business, when a
passing stranger stabs you to death in a matter of fact way, as happened
recently to a school girl. It may seem odd to a statistician, but that sort of
thing bothers us. In Kahneman and Tversky’s phrase, it has “salience”. To die at the hand of a
jilted lover is bad enough, but to die because of a delusion is senseless, and gives
us no chance of security. We fear more than statistics.

Now we go on to the murder statistics: The probability that a schizophrenic will
commit murder each year is 1 in 3000.

Comment: Why so high? Can that be right? (I have
checked the publication to make sure).That translates to a murder rate of 33
per 100,000. In Britain the annual murder rate is 1.2 to 1.4 per 100,000. Out
of charity I will take the higher estimate of 1.4. (The more peaceable a
society, the more it makes sense to give the figures per million, and 14 per
million is the usual British estimate). This suggests that schizophrenics are
23 times more murderous. Something wrong here, I fear. Are these authors really
arguing that 1:3000 is a low rate? It would be like moving from the UK to South
Africa or Columbia, currently among the most murderous nations on the planet. I
hope there is something wrong with their figures, because if they are accurate
the implications are alarming. There must have been a miscalculation, because
if the figures above are correct in showing that there are 30 violent crimes
per 100,000 schizophrenics, then fewer of them will go on the whole way to
murder, and the homicide figures should be much lower.

A few years ago the President of the Royal College of Psychiatrists was reported as
having said that schizophrenics caused only about 10% of the violence. Given
that schizophrenics are at most 1% of the population (and probably only 0.7%)
this was tantamount to saying they were at least 10 times more dangerous than
normal. Four or five times are the more accurate figures.

Looking at the more recent Royal College of
Psychiatry report: Rethinking risk to others in mental health services Final report of a scoping group (June 2008) provides us with fresh estimates of
dangerousness.

It
is estimated that 5% of homicides are committed by people with a diagnosis of
schizophrenia. (page
18)

Comment: A truthful statement. That
is exactly what one would expect, if schizophrenics were 1% of the public and
committed 5 times more violent crimes. Their greater rate of violence
translates directly into a proportionately greater share of “societal”
violence.

The
incidence of mental illness among those remanded for acts of violence is
relatively high: Taylor & Gunn (1984) found psychosis in 11% of those
remanded for homicide and 9% of those remanded for other acts of violence.
Similarly, violence in mental health services is not infrequent. The UK700
study (Walsh et al, 2001) found
physical assaults had been committed by 20% of patients over a 2-year period
and 60% had behaved violently over the same period. Taking the figure of 1
homicide per 20 000 patients with schizophrenia per annum, over the 20 years of
a typical patient ‘lifetime’ (assuming active disease from the age of 20 to 40
years) the risk per patient is 1 in 1000 (Maden, 2007). The occurrence of a
homicide by a patient with a mental disorder also has potentially devastating
implications for the professionals involved. (page 20).

Comment: The homicide would have devastating implications for the victim
and the victims’ family and friends. It would have serious implications for the professionals, whose careers can be
damaged, but they would not face capital punishment. Having had friends in this
category, I can testify that it is an awful process for them, but most of their
colleagues know it could happen to any of them doing front line psychiatric
work: “There but for the grace of God go
I”.

The next point that this report
gives the homicide risk as 1 per 20,000 patients per annum, not the 1 in 3000 each
year given by Walsh and Buchanan. Taking these new figures, they suggest that
the lifetime risk of homicide over 20 years is: the addition of 1 in 20,000
risks per annum for 20 years of active exposure, namely 20 in 20,000, or 1 in
1000. In comparison, the risk of being murdered by an ordinary member of the
public is 1.4 per 100,000. Over 20 years that comes to 28 per 100,000 or 1 per
3,571. Thus, these figures suggest schizophrenics are 3.5 times more violent,
which is within the published range. These figures look reasonable.

So, can we detect and prevent
violent events?

For
example, it has been calculated – using the average of all the tests assessed
by Buchanan & Leese (2001) – that if 5% of the patient population were within
a high-risk category, use of the tests would correctly identify 8 people out of
every 100 in the group who would go on to commit acts of violence but
misidentify as violent the other 92. In fact, fewer than 1% of community
patients will commit serious violence over a period of a year, which means that
the tests would correctly identify only 3 patients out of 100. Homicides occur at a rate of 1 in 10 000
patients suffering from a psychosis, per annum, which makes prediction
impossible (Shergill & Szmukler, 1998; Dolan & Doyle, 2000). (page 23)

Comment:
Two problems here. First, this is significantly different risk estimate: in
that on page 20 it was 1 homicide per 20 000 patients
with schizophrenia per annum and on page 23 it is 1 in 10 000
patients suffering from a psychosis, per annum. This is confusing, but presumably
it refers to the symptom of psychosis, rather than the diagnosis of schizophrenia,
and other conditions can induce psychotic behaviour, so we should probably put this
estimate aside for the moment, though it is twice as high as the former figure.

Second,
low base rates do not necessarily make prediction impossible, but simply very
difficult in the absence of valid indicators. Phenylketonuria occurs in 1 in 10,000 to 15,000
newborns (higher in the US) and most cases are detected by screening. Tandem
mass spectrometry is claimed to be 100% sensitive and 98% specific, which means
that virtually all cases are picked up and the test rarely misclassifies other
conditions as being phenylketonuria.
Treatment is
started promptly, and as a result, the severe signs and symptoms of the classic
condition are rarely seen.

Have pity on Psychiatry.
As the quotation above reveals, current tests do have the sensitivity and
specificity requires to usefully predict violence, let alone murder. The best test that forensic professionals
have is a detailed interview leading to a risk assessment, though there is
still debate about precisely what this risk assessment should contain. There
must also be checking of records, and good links with social services and the
Police. Often, this still defeats the current organisation of services.
Resource constraints make the problem more difficulty. Poorly trained or poorly
motivated ward staff sometimes do not follow risk protocols, even when they are
written in to the patient notes.

Note that this
unsatisfactory state of affairs does not have to continue for ever. One good
indicator seems to be patients trying to re-admit themselves to hospital.
Failure to take medication, and over-indulgence in alcohol and drugs is another
indicator. It is very hard to detect the signal from among the noise, but we
have to keep trying. Perhaps if we could monitor electronically, as if the
person had diabetes, we could eventually predict with less error. What would we
monitor? Thoughts? Arguments? Drugs in the bloodstream?

So,
how can one argue that schizophrenia makes people more violent, but that this
does not cause much “societal violence”? This boils down to a particular
statistical technique, the calculation of population-attributable
risk per cent (PAR%): the percentage of violence in the population that can
be ascribed to schizophrenia and thus could be eliminated if schizophrenia was
eliminated from the population. Stand back from any calculations, and you
already know the answer. If 1% of the population has schizophrenia, and they
account for 5% of the violence, then curing them of the condition (or just the
violent aspects) would reduce societal violence by 5%. It is a matter of
perspective whether you think that this accounts for relatively little societal
violence. To me, this line of argument seems like trying to wish away a finding
by changing the currency of account. I think it is better for researchers to
publish their results on the risks of violence in schizophrenia, which is higher
in relative terms but low in absolute terms, without excursions into concepts
of “societal violence” as a false comparator. It is a bit like saying that
someone who drives a gas-guzzling Hummer has little societal impact because
they contribute only a very tiny fraction of the world’s pollution. Don’t move
from one metric to the other for rhetorical purposes.

So, to summarise
what psychiatrists are telling us about schizophrenia and the risks of
violence: there is general agreement that schizophrenic men are four to five
times more violent than the rest of the population, but the absolute rates of
all violence are mercifully low. The public should make up their own minds how
they wish to respond.

Friday, 15 March 2013

To Sky News early this morning,
to talk about whether soldiers returning from Iraq and Afghanistan are more
violent than members of the general public, with whom they must now live in
society. The MacManus et al. (2013) paper came out of embargo today, and it has
an interesting story to tell, as well as raising an issue about what we mean
when we “control for” correlated variables.

MacManus et al. did a proper
study, taking 13,856 randomly selected soldiers and checking their Police
records on the national computer database.

http://press.thelancet.com/violentoffending.pdf

In brief, the key thing about
male violence is that it drops sharply by age, probably in line with orgasm
frequency, testosterone and muscle strength. Young males fight, older males
reminisce.

Being deployed into the theatre
of war did not make them more violent later on (2.4%), but serving in a combat
role did (6.3%). Being exposed to traumatic events increased later offending,
in a linear trend (1.6% with one trauma, 4.1% with up to 4 traumas, 5.1% for up
to 16 traumas). Violent offending was strongly linked with alcohol intake (9%
for heavy drinkers, 2.2% for the rest). Those with post-traumatic stress
disorder were more violent (8.6%) than those without the disorder (3%). For
those with the disorder, those with the hyper-arousal cluster of symptoms (an
extreme sensitivity to signals of danger) were the most violent. In an
interesting validation of self-reported aggressive behaviour, those with high
scores on an aggression questionnaire were more violent (6.7%) than those with
zero scores (2.5%).

If you look at what predicts post-service
violent offending, it is rank and pre-service violent offending. In a
meritocratic army, rank is strongly associated with intelligence. Those with A
levels were half as likely to offend (30.8%) than those with only GCSE’s or
less (69.2%). A standard theory of
violence is that it represents a severe lack of negotiating skills. It is a
high cost way of achieving a personal benefit. Few mutual benefits are obtained
by fighting.

The authors have
followed the entirely proper technique when they look at the effects of deployment
and combat, which is to correct for predisposing variables. For example, if the
most aggressive soldiers are put into front line combat, which makes sense from
a military point of view, then they are likely to show more violence in later
civilian life, even if combat itself had no effect on them. So, you have to
correct for their predisposition to violence. In fact, their tables show
adjusted hazard ratios which
have been adjusted for age, education level, pre-service violent offending,
rank, service, engagement status, and serving status. Of course, in real life
you cannot “adjust” for education levels. Those with less education and lower
intelligence have fewer skills and achieve less powerful solutions to problems.
The authors, correctly, have adjusted so as to make a point about the impact of
combat (their adjustments reduce the real effect).

Other authors tend to go overboard with adjustments. For
example, they “adjust” life achievements to take into account levels of
education, and then find that intelligence does not predict much. They neglect
to mention that levels of education are strongly influenced by prior
intelligence: those of low abilities drop out sooner.

What do we do about the dogs of war, who have been sent
out to kill on our behalf? I think they are owed a duty of care. The UK does
not have a dedicated, stand-alone Veteran’s Service. At the very least ex-service
personnel hey need to be tagged by the Health Service and associated services
so that their problems can be seen in the context of their military service.

What can we do about the deleterious effects of alcohol?
Currently we are in the midst of a debate about alcohol pricing, and it looks
like the plan to introduce a minimum floor price will be dropped. From a libertarian point of view you should be
free to intoxicate yourself as you chose. From a social point of view the costs
of alcohol and drug induced violence are far too high, and restrictions are
prudent. Increase cost, restrict access.

Finally, how do reduce the
overall rate of post-service violence? We are having another debate about
reducing expenditure on the military, as part of a general round of cuts. (Most
of these do not turn out to be cuts at all. They are noble statements that at
some time in the future the rate of increase of public spending will be brought
down somewhat).

We must make a virtue of
necessity. Here is a chance to make a real cut. Forget about recruiting thousands of soldiers. Just recruit a few well
educated, clever, abstemious, officers. That
will impress the enemy.

Tuesday, 12 March 2013

To the Finborough Theatre, to see “Laburnum Grove” in a room not much larger than the sitting room the
play depicted, such that when the daughter of the house accidentally dropped
her napkin at my feet I had to restrain myself from picking it up and handing
it back to her.

J.B.Priestley’s 1933
play has the dramatic construction and simplicity of text that he was to
hone to perfection in “An Inspector Calls”, which in part this play prefigures.
It supposedly tells a simple tale of humdrum suburban fraud, in which the mild
head of the household, in the temporary absence of his loving wife, confesses to
his daughter, her pushy boyfriend, and his wife’s sister and husband who are staying
with them, that after his wholesale paper business came near to bankruptcy four
years before, he used his knowledge of high quality paper to become a forger of
banknotes. As you may imagine, this confession
has a considerable impact. The daughter regrets complaining about her father
being boring, the boyfriend withdraws, fearing trouble, and the sponging sister
and unemployed husband decide that they too must get out before they are
implicated as accessories to crime. Inevitably, the wife finds out about the
prank, and shows the gullible household how they have fallen for the story
taken from a recent crime thriller. She is therefore perfectly at ease when an
Inspector Calls from Scotland Yard, investigating a counterfeiting gang.

Robert Goodale shines in the lead role, with Lynette Edwards,
Timothy Speyer, Georgia Maguire and Karen Ascoe very close behind. The
props also deserve mention: everything becomes particularly believable when it
takes place in the granny’s house of nostalgia. Those old sticks of furniture
are still knocking about somewhere in our own houses.

The rest of the play revolves on the themes of whether,
sometimes, an illegal act can have positive consequences. In his supposed
confession about being a forger, our hero explains that the counterfeit notes
serve the social purpose of boosting the economy, a notion then being made
popular, at least in some circles, by Keynes in his famous comment "If the Treasury were to fill old bottles with
bank-notes, bury them at suitable depths in disused coal-mines which are then
filled up to the surface with town rubbish, and leave it to private enterprise
on well-tried principles of laissez-faire to dig the notes up again (the right
to do so being obtained, of course, by tendering for leases of the note-bearing
territory), there need be no more unemployment and, with the help of
repercussions, the real income of the community, and its capital wealth, would
probably become a good deal greater than it actually is."

Of
course, one must note that Keynes did not propose forgery, but the implications
are clear: there are circumstances in which, the argument goes, printing more
money helps the real economy, by oiling the wheels and boosting confidence. As
a point of pedantry, Keynes did not write this until 3 years after the play
came out in The General Theory of Employment, Interest and Money (London: Macmillan,
1936) p. 129, but as fellows of the Left, or as Victorian liberals, they knew
and influenced each other.

So, a thirties interior is the perfect setting for contemplating the
morality of quantitative easing, and the ways in which tainted money can be
laundered when it suits personal needs. The Great Depression still casts its distorted
shadow on the present day.

Friday, 8 March 2013

And so, down
Bride Lane, just off Fleet Street, just past The Old Bell Tavern, where we
stopped for a drink in a convivial scene that would have been familiar to
Samuel Johnson, who lived but paces away; then further down the narrow lane that
follows the footsteps of centuries, past the soaring purity of Wren’s St Bride’s
Church whose colonnaded tower became the icon of wedding cakes, and where we
commemorated the life of a friend only a few months ago; crowds going to a
private party of beautiful young things where we were served champagne without
asking for it (we demurred) and then finally in to the Bridewell Theatre to see
the Voysey Inheritance.

It is a contemporary
story. The Senior Solicitor of a City firm has arranged for his younger partner
and son to work through two particular files he normally keeps in his safe. The
son, a dutiful and somewhat emotional young man finds that these show massive
fraud on his father’s part. With some elegance the father, when confronted,
explains that he inherited the fraud from his own father, quite against his
will, and has worked all his life to cover it up, thus protecting the family
name. He admits that he has dipped in to client’s capital himself, but explains
that no-one has really been harmed, because clients only want their annual
dividend, which he has always managed to provide without fail. The young and
inadequate son is presented with a moral dilemma: why blow the whistle on
something which has not yet hurt anyone, and which might, with his fresh
management, eventually be brought back onto an even keel? This is not a case of
right and wrong, but merely a case of legal and illegal.

This play
rings many bells, and is a fable for our times. The Bernie Madoff scandal comes
most easily to mind, but it also has the DNA of quantitative easing, in which
expert opinion agrees that the full confession of national bankruptcy must be
denied for the good of the public, and that a Ponzi scheme is not immoral if it
is done in good faith, and solely for the protection of the common folk, who
are easily dispirited and must be fed uplifting lies.

Does one
mend the problem, or postpone it? Postponement may be the best option, because
something may always turn up. Perhaps this is a very pure survival instinct.
Never say die. The play’s theme also
resonates with whistle-blowing about bad services in hospitals and care homes,
when covering up may allow the institution to repair the damage and improve
matters without causing widespread and unnecessary public concern. Written by Harley Granville Barker in 1905 this masterful play was an
exploration of the Noble Lie, the seductive argument that some evasions have
their purposes, and create their own moral benefits.

My usual
opinion is: why bother to go to the London theatre at all? There is often
better drama on television, and much of the usual West End fare is a
disappointment, with gaudy vacuity in the popular offerings, and ponderous,
creaking, pretentious scripts in the self-consciously serious new drama. Even worse,
it is hard to find a parking place or a drink of any sort during the interval.

I got my
answer tonight, in a small theatre where I was a few yards from the actors, the
highly accomplished Tower Theatre company, with an assured John Morton as the
senior Voysey, and an adept Alex Buckley as the son who inherited the moral dilemma.

It is an altogether
excellent production, but for me the highlights were the changes of scene. Rather
than the usual furtive interlude of black-clad stage hands there was a robing scene
which was a play in its own right: the senior partner changing from his City
day clothes to the white tie and tails of a formal country house dinner, paying
exquisite attention to the creation of the knotted bow whilst behind him the cast changed the office into a dining room, exactly in the time it took him to change
his clothes.

A grand
evening, talking to friends and by chance to what turned out to be the first of
six men in London with a particular surname whom I rang at random twenty years
ago, searching for a long lost university friend of the same name, and thus
found his number in one call. Something about these tangled City lanes invites
coincidence.

Then back
home, past the Black Friars in their imaginary sombre cowls, and along the swollen
misty river, the ancient and now floodlit buildings looming up above the cat-like
London fog.

Wednesday, 6 March 2013

I have had many fantasy careers but, so far as I can
recall, I have never wanted to be a central banker. Well, not until recently. In
my youth I could see the advantages of being a film star, a pop star, a racing car
driver, even a kindly mediator preventing world wars and, failing that, the wise
leader of a suitably large country. In all these pursuits I thought I would be
able to impress girls. The thrill of banking passed me by. Riches I could understand,
but setting interest rates never excited me.

Why now, at a
time of supposed maturity, should I be idly thinking of the remote possibility
of becoming a central banker? It fails the fundamental test of drawing in
girls, or I presume it does.

At this particular moment (midday Greenwich Mean
Time) the Dow Jones is at an all-time high, and Associated Press reports:

“Investors are cheered by major central
banks' commitments to keep supporting growth in the world biggest economies —
the U.S., China, the 17-country eurozone, Japan and Britain”.

After some cautionary words from an
investment advisor that markets could go down as fast as they go up, they
continue:

“Federal Reserve chairman Ben Bernanke has
recently suggested that the central bank would continue its campaign of massive
bond-buying, known as "quantitative easing," to support the world's
biggest economy. The issuance of bonds has pushed their prices down, steering
investors toward stocks”.

"The lesson is clear. Don't bet on Capitol Hill. Bet on Fed
Chairman Ben Bernanke instead. To be sure, it was Bernanke's reassurance, as
last week's congressional testimonies on monetary policy, to keep QE3 on its
present course that turned a worried stock market into a record high,"
said analysts at DBS Bank Ltd. in Singapore.

My interest lies in trying to understand what
central bankers do. The job apparently requires a very high level of
intelligence, with a concomitant capacity to deal with highly abstract
concepts, yet with considerable impact on practical matters. Running a central
bank is a highly complex task with massive impact on society. Perhaps the
mostly male practitioners do attract the fair sex after all. This moment of
glory will be prime time for them in the mating game, if one gives any credence
to evolutionary psychology.

To understand central banker’s craft it is necessary
to understand money, economic theory and, though they might deny this, politics.
Central bankers always claim to be independent, but they are dependent on the
state for their function, their salary and their pensions. Nonetheless, most of
them are judged to be well-qualified for their roles. Their pronouncements
show, at the very least, the vocabulary one expects of an intelligent person,
and a command of jargon which inspires admiration, if not always confidence. By
the standards of our tribe, they have high status, and deserve the attention
paid to them. They ought to know what they are doing.

How can we judge whether they are making intelligent
decisions? This is a particular form of
the general question, which is how we judge the intellectual demands of a role
or profession. One approach, combining biography with clever statistical
analyses, is to look through all the major encyclopedias and reference books, and
simply measure how much space is allocated to each person. To avoid the immense
bias of our focus on the present time we exclude recent developments. For
example, in Human Accomplishment Charles
Murray (2003) looked at the period 800 BC to 1950. Understandably, he
concentrated on subjects like Mathematics and Physics where it was possible to
achieve a consensus. He made no such attempt for Economics, and left politics
well alone.

We cannot look at the long historical track
record of central bankers, because they are a relatively recent job creation. By
common consent the first national central bank was established on 27 July 1694,
and served as a template for all others. Created purely to raise money for
William III so that he could continue a war against France, it was called The
Bank of England. Modesty is no part of
central banking. The US Federal Reserve was not established until December
1913, and Brazil had no central bank until 1945. It is possible to function
without them. It may be better. Scholarly debate continues as to whether bank
failures and business cycles have been altered for the better by these
governmental agencies.

The financial experts seem to know what they want in
a central banker. Usually they choose academics or bankers who feel confident
that they can find ways of controlling money for the public good, by means of
interest rates, printing new money, and by the way in which they operate the relationship
between the central bank and the major clearing banks, buying up some debt and
then selling it back again years later. Setting interest rates is probably the
central task and the easiest to understand. The rest is clothed in jargon and
requires specialist knowledge.

However, to the lay observer their actions seem
rather odd. After all, currently central bankers are dealing with a debt crisis
by making it cheaper to borrow money. In contrast, citizens are usually asked
to pay off their debts. Central bankers are withdrawing “bad” debts and putting
them into “bad” banks, as if someone had broken wind and it was impolite to
mention the fact. In contrast, citizens are not allowed such tricky accounting.
Central bankers are relaxed about creating money (and inflation). Citizens are
put in jail if they print their own money. Central bankers do not mind
distorting prices by manipulating interest rates. Usually, citizens must pay
the rate the lender offers, unless they can find a more favourable provider of
funds. Citizens are in the market, not manipulating the market.

So, on this day of all days, when central bankers
have most cause to celebrate, I still want to ask whether they are behaving
intelligently. However, the question needs to be sharpened up a bit, because
intelligent people can often behave unintelligently. They do it less often than
less intelligent persons, but can sometimes cause more trouble. Clever sillies
can be dangerous.

A typical setting in which even clever people end up
making unintelligent decisions is a social
trap. In my view all central bankers
are in the position beautifully described by Martin Shubik (1971) "The
Dollar Auction: a paradox in non-cooperative behaviour and escalation" The Journal of Conflict Resolution, 15,
1, 109-11. (http://www.math.toronto.edu/mpugh/Teaching/Sci199_03/dollar_auction_1.pdf)

In this auction it appears to all participants that
they can get a dollar for 5 cents. However, if they enter the auction they must
agree to pay the highest bid they have made, whether they win the auction or
not. It looks great to begin with, because the dollar looks very cheap.
However, once committed, the participants find they are trapped, and try to
minimize their inevitable losses by bidding even higher. I used to conduct such
auctions with students, and found it easy to drive them higher than a dollar,
though I never collected any money from them.

In all social traps there is a short-term individual
gain which in the long run leads to a loss for the whole group. For example,
fish are free in the sea for anyone with a big enough net, but if we fish out
the sea we will have lost a good source of food for ever. Similarly, I
benefited from an hour of central heating today, but if we all keep burning
fossil fuels we might deplete our resources or, conceivably, over-heat our
planet.

However, we cannot be sure that world-wide
quantitative easing is a social trap. It may be a brilliant, well-coordinated
strategy to pump liquidity into a timorous public, a public who have now, finally, got
the message.

Gold is $1574 at the moment. In dollar terms this is
a 30 year high. In inflation adjusted dollars, so long as one ignores a brief
spike in 1980, it is also very near a 30 year high.

In two previous posts (The
Wealth of Nations, Cognitive Capitalism) I had mused on the contribution of
human intelligence to the creation of wealth.

Last week I belatedly came across
Earl Hunt’s (2012) “What makes nations intelligent?” Perspectives on Psychological Science 7 (3) 284-306. In this piece
he sets out some of the evidence for intelligence making people and nations
rich.

One strong example is that intelligence predicts job success at r= 0.4
for low complexity jobs, r= 0.52 for medium complexity jobs and r=0.58 for high
complexity jobs. These complex jobs make
the biggest difference because they increase the rate of productivity gains. Societies
had few such permanent jobs before the industrial revolution, and the
increasing complexity of the emerging industrial economy depended on such
occupations. Bright people were needed
to fill these demanding posts, which led to the emergence of a middle class of
skilled workers.

Another strong example is that in our own age the very, very
brightest in adolescence (top 99.75th percentile) go on by age 40 to
be three to five times more productive than even the very bright (99.25th
percentile) and at least 12 times more productive than the rest of the
population (in terms of patents, which is a good predictor of economic
innovation and wealth creation). Intelligence matters.

But my eye was drawn to a simple summary of the causes of
wealth, based on Rindermann’s 2008 work on 17 nations for which he had data for
cognitive data. So, in the hope of
getting comments, I leave you with a single table showing some of the desirable
national consequences of intelligence, and some undesirable consequences of the
lack of it.

Table
4. Correlations of National Levels of Cognitive Ability with selected desirable
and undesirable attributes of the country 1960-1996

Desirable Undesirable

Attribute Correl Attribute Correl

Rule of law .64 Fertility rate -.73

Quality govt .64 Gini inequality -.51

GDP per capita .63 HIV infection rate -.48

Economic freedom .52 Govt spend % -.47

Economic growth .44 Homicide rate -.23

Solved homicides .32 War: freq & impact -.22

Rindermann, H. (2008) Relevance of education and
intelligence at the national level for the economic welfare of people. Intelligence, 36, 127-142.